Subject. Channels of interaction between credit and business cycles in Russia. Objectives. To examine the mutual influence of credit and business cycles in Russia and to assess the strength of the relationship between them. Methods. The study employs methods of graphical, correlation, and econometric analysis, including the construction of graphical trends, correlograms, and SVAR models. Results. Foreign and domestic approaches to modelling the interaction between credit and business cycles were reviewed. An econometric model relevant for Russia was built; based on it, a conclusion was drawn about the presence of a bidirectional relationship between the business and credit cycles. Moreover, the identified bidirectional relationship reveals an asymmetric interaction at different stages of the cycle. Conclusions and Relevance. It is necessary to implement a preventive policy aimed at eliminating credit market failures. Direct intervention in the credit cycle to smooth fluctuations in business activity is more effective than the standard policy of smoothing economic cycles. The results can be applied by the Bank of Russia when making decisions on developing the regulation of the credit sector of the economy. They can also help build more accurate forecasts of the dynamics of Russia’s real economic sector by incorporating the credit channel into the model.
Keywords: economic cycles, credit cycles, business cycles, SVAR modeling, Russia
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